Crisis Comms Coca Cola
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How does Coca Cola handle crises? Discuss whether this global leader has succeeded in handling crises from headquarters in Atlanta with reference to both the Belgium school children case and to Dasani in the UK. You must access relevant media comment from the time in making your assessment.
A crisis is “a major occurrence with a potentially negative outcome affecting an organization, company, or industry, as well as its publics, products, services, or good-name”; it is also “a sudden and unexpected event that threatens to disrupt an organization’s operations and poses both a financial and a reputational threat”. All organizations need to be prepared for any kind of unexpected crises, as true crises define the companies’ future actions and have long-lasting implications for organizational climate and profitability. The bigger the organization is the higher the chances are for a crisis to happen at one point in its evolution. Crises cannot be predicted, but they should be expected, as managers should anticipate them and prepare for them. In this essay, we will examine two of the best known crises, suffered by the Coca-Cola Company, the one in 1999 in Belgium and the one in 2004 in the UK, focusing on their crisis management. Crisis management can be defined as “a set of factors designed to combat crises and to lessen the actual damages inflicted”. In Belgium, the crisis started when more than 200 consumers of whom most of them were children, became ill after noticing an irregular taste and odour in bottled products and on the outside of the canned soft drinks.
The Belgian authorities stated at that time that the drinks had triggered a blood disorder that caused the destruction of red blood cells among people who had drunk Coca-Cola. Those affected suffered from nausea, shivering, headaches and diarrhoea, some of them seriously enough to be admitted to hospital. Trying to manage the crisis from their headquarters in Atlanta, Coca Cola’s message remained for four days that it was merely a bad odour that was causing the nausea and there was no risk to public health. They agreed that the contaminated batch to be recalled, but they still did not have a clear explanation. Worried about the increasing number of cases, the Belgian Health Ministry ordered on 14 June 1999 that all Coca-Cola trademarked products to be withdrawn from the Belgian market and warned Belgians not to drink any Coca-Cola products they had in their homes. Marylise Lebranchu, Secretary of State at the Finance Ministry, said that the government had acted because it was not satisfied with Coca-Cola’s explanations.
A week after the reported illnesses and after the Health Ministry withdrew the products, Coca-Cola Enterprises Belgium issued an official statement in a news conference. The director-general, Philippe Lenfant, told that a bottling plant in Antwerp had used the wrong carbon dioxide to put the fizz in soft drinks bottles.Moreover, the head of sales for Coca-Cola even visited those in hospital to check after their welfare. However, the next day other cases appeared and they were referring to schoolchildren and cans produced in Dunkirk. In addition, the manufacturers of the gas from the Antwerp plant denied Coca Cola’s claims and said that the gas was perfectly normal and that they could prove it. Later, France, Luxembourg and The Netherlands also banned or restricted the sale of Coca-Cola products. It was estimated that a total of 15 million bottles and cans of products were recalled.This cost Coca-Cola Co. more than $200 million in expense and its bottler in Belgium, Coca-Cola Enterprises estimated its losses at $103 million.
It was only after the Belgian and French governments recalled the products that Coca Cola finally mobilized and Doug Ivester, Chairman and CEO came to Europe and apologized: “We let down the people of Belgium, and we’re sorry for that, but now we’re committed to do what it takes to earn their complete trust again.” Coca Cola then issued another report which they transmitted to the Ministry of Health where “chlorine products” that “used to clean automatic drink dispensers” was considered as one of the possible causes of the illnesses. Coca-Cola was harshly criticised right away by the press not just for their negligence, but also for the way they handled the crisis. “Coca-Cola seemingly forgot the cardinal rule of crisis management – to act fast, tell the whole truth and look as if you have nothing to hide”. Coombs argues that crisis managers must always address first the physical and psychological concerns of the victims, and then focus on the organization’s reputation. The fact that Coca-Cola first responded by denying that there was any problem and by trying to pass on the blame to the victims proves the existence of a dysfunctional organizational culture.
“Coca-Cola’s public relations error is to have seemed keener to protect its own back than to allay the understandable fears of consumers”. Thus, it appeared as an organization that cannot deal with public perception when it is put on the spot and under close media scrutiny. Coca-Cola’s biggest mistake was that the crisis was managed from Atlanta instead of being contained in Belgium at the local office, so it failed to address the relationship between stakeholders and its own reputation, which are key elements in dealing with a crisis. “Crisis team members must bring certain area-specific knowledge and skills that will facilitate the execution of the crisis plan.” The immediate decision of recalling all products made by the Belgian Health Ministry was also determined by the fact that Belgium had just suffered from a food scandal involving contaminated meat during elections time, situation which the Atlanta team was not fully aware. Even though the company kept insisting that there were “no health or safety issues”, and that the drinks “might make you feel sick, but are not harmful” it was not enough for the Belgian Ministry, but especially for the Belgian consumers, who had gone from one health scare to another.
However, this experience taught Coca-Cola a lesson related to managing crises, so that when the Dasani disaster happened in 2004, the organization was much better prepared. After becoming the number two bottled water brand in the USA, Coca Cola decided to introduce Dasani to Europe, planning to sell it across the UK, France and Germany. The fact that Coca-Cola did not seem very open regarding the source of the water raised suspicions. Dasani received the first blow when “The Grocer”, the food industry highly influential trade magazine, ran a piece on the “actual” source of Dasani, revealing that the bottled water was the same as plain tap water and the entire press went ballistic.The media criticized Coca-Cola for misleading public by describing tap water as “pure” and cheating them by selling it at highly inflated price. “The Guardian” was writing: “The Dasani crisis is a case of a giant that is so desperate for growth that it appears things are being overlooked.
Coke are master marketers, they can sell pretty much anything – even tap water in the right market – but sometimes they get so caught up in the marketing that they lose touch with reality.”Moreover, “The Independent” was criticising: “A company takes ordinary mains water, puts it into fancy blue bottles, slaps on an exotic name and sells it for thousands of times more than it costs out of the tap. It sounds like an idea dreamt up in a boardroom that was too outrageous to implement, or a far-fetched plot of a television comedy. But the idea is, with a few modifications, behind Coca-Cola’s latest drink, bottled water called Dasani.” In reaction to these accusations, Coca-Cola first insisted on the fact that Dasani was pure and was better than tap water due to its sophisticated purification processes based on NASA spacecraft technology and that the drink is “as pure as bottled water gets”. Judith Snyder, brand PR manager for Dasani, confirmed “municipal” water supplies were used but said the source was “irrelevant” because it “doesn’t affect the end result”.
And right after this brand credibility damage, Dasani suffered a fatal blow when it was found out that the water supply had been contaminated with bromate, a chemical that can cause cancer. Coca Cola ran a product test and informed the FSA. The level of bromate exceeded the UK standards, but they were lower than European standards. Even though the FSA confirmed there was no immediate health or safety risk, after only five weeks on shelves in the shops in the UK, all Dasani water bottles were recalled as a precautionary measure. The Coca-Cola crisis team issued right away the announcement to the press, showing that the company takes full responsibility for the incident. They handled over 100 media interviews, taking control of the situation and avoiding media speculation. “Good corporate communication has to be received by the intended audience; understood in the way it was intended; perceived to be positive; interactive, giving the audience an opportunity to respond”.
Jonathon Chandler, the director of communication for Europe and the Middle East at that time said: “We volunteered to withdraw the product, and were able to make clear we understood the problem, its significance and that we knew how to fix it.” The way the crisis management team handled the situation represents a good example of crisis communications, as Coca Cola acted quickly and succeeded in protecting the global image of the organization, as well as the image of Dasani on its other markets outside Europe. The company was able to work promptly with the local regulator, act immediately and address all the relevant stakeholders while simultaneously equipping other Coca-Cola markets with the information and tools to manage the issue in their countries, which they did not do in the Belgium case. Michael Regester says that at the time of the Dasani situation, the company was in the process of introducing a new, more rigorous stakeholder review procedure, which would have addressed the issues before escalating.
This new approach however, has been widely used across Coca-Cola since then. In conclusion, considering both cases, we can observe how Coca-Cola Company knows how to learn from its own mistakes and apply the lessons further on, remaining a successful multinational organization. In terms of crisis communications “telling a story is a culturally typical response to crisis; it may be a response by the person associated with the event – an ostensible or potential crisis – who is expected to report to others why the narrative has changed from routine to crisis, who or what is responsible for that change, and what will be done to resolve the narrative – maintain or re-establish control of the organization’s operations.”And this is exactly what Coca-Cola did considering Dasani, as the effective communication of the messages and the quick reaction to the events saved the company from a reputational disaster, whilst the majority of media coverage on Coca-Cola following the Belgium crisis, referred to a company “struggling to rebuild its reputation” because they delayed keeping their audiences informed.
* Dan Pyle Millar, Robert Lawrence Heath – “Responding to Crisis: A Rhetorical Approach to Crisis Communication”, Lawrence Erlbaum Associates 2004 * Michael Regester, Judy Larkin – “Risk Issues and Crisis Management”, CIPR, 3rd Ed. 2005 * W. Timothy Coombs – “Ongoing Crisis Communication – Planning, Managing, and Responding” Sage Publications 1999 * W. Timothy Coombs, Sherry J. Holladay – “The Handbook of Crisis Communications”, Blackwell Publishing Ltd. 2010 * Peter Steidl, Gary Emery – “Corporate Image and Identity Strategies – Designing the Corporate Future”, Business and Professional Publishing 1997 * Alan Cowell “Laredo Morning Times” issued Sunday, 5 December 1999 “Coca Cola still haunted by contamination scandal” (last accessed on 13th April 2012 at http://airwolf.lmtonline.com/news/archive/1205/pagea33.pdf) * Victoria Johnson, Spero C. Peppas “Crisis management in Belgium: the case of Coca-Cola” (Last time accessed on 17th April 2012 at http://www.hs-fulda.de/fileadmin/Fachbereich_SW/Downloads/Profs/Wolf/Studies/belgians/belgians_crisis_management.pdf) * Matthew Beard, Columnist, The Independent issued on Friday 5th March 2004 * http://www.independent.co.uk/news/poisoned-belgian-coke-on-uk-sale-1100387.html last time accessed on 16th April 2012 *
http://news.bbc.co.uk/1/hi/business/369684.stm last time accessed on 16th April 2012 * http://news.bbc.co.uk/1/hi/business/3566233.stm last accessed on 17th April 2012 * http://www.economist.com/node/322736 last accessed on 16th April 2012 * http://www.wsws.org/articles/1999/jun1999/bel-j19.shtml last time accessed on 13th April 2012 * http://www.icmrindia.org/casestudies/catalogue/Marketing/MKTG103.htm last time accessed on 17th April 2012 * http://www.guardian.co.uk/lifeandstyle/2004/apr/18/foodanddrink last time accessed on 17th April 2012 * http://www.guardian.co.uk/business/2004/mar/20/medicineandhealth.lifeandhealth last accessed on 17th April 2012 * http://fmpgroupadocumentary.blogspot.co.uk/2009/11/dasani-coca-colas-water-scandal.html last accessed on 17th April * http://www.growingbusiness.co.uk/crisis-management.html last accessed on 17th April 2012
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